Does An Insurance Company Have The Duty To Indemnify A Policyholder Against Criminal Activity? (PA)
When a policyholder is sued and seeks coverage from their insurance company, it can become complicated when that insurance company refuses coverage. It can become even more complicated when the underlying cases concern a crime. In Samsung Fire and Marine Insurance Co. Ltd (US Branch) v. UFVS Management Company LLC, (E.D. Pa. 2023), the insurance company Samsung Fire and Marine Insurance, Co. LTD., U.S. Branch (“Samsung”) brought a declaratory judgment against UFVS Management Company, LLC (“UFVS”), Roosevelt Motor Inn, Inc. (“Roosevelt Inc.”), Roosevelt Inn, LLC (“Roosevelt LLC”), and Yagna Patel (“Patel”) (collectively, “Policyholders”) seeking a declaration that Samsung did not have a duty to defend or indemnify Policyholders in four state court actions brought against them. The underlying state court actions were brought by four different women, who alleged that they were victims of human sex trafficking at the Roosevelt Inn in Philadelphia, owned by Policyholders, and covered under Samsung’s policy at the time of the alleged incidents. Subsequently, when the women brought suit against Policyholders, they sought coverage against the claims. The relevant provisions of both the Nationwide and Samsung policies were those providing coverage for bodily injury and property damage (Coverage A) and personal and advertising injury (Coverage B). Samsung alleged in their declaratory judgment that they did not have a duty to indemnify the Policyholders, because there was an exclusion for abuse or molestation in the insurance policy. Additionally, Samsung, along with the other insurance companies (collectively, “Providers”) involved in the relevant third-, fourth-, and fifth-party claims to this matter, argued that providing coverage to Policyholders went not only against the respective policies, but also against Pennsylvania public policy. Providers further asserted that even if their policies were found by a court to cover Policyholders, public policy would bar coverage, and would require the Court to award declaratory judgment. The Court ruled in favor of the Providers, opining that “shielding Policyholders from the consequences of their criminal conduct would be against the safety, morals, and welfare of the Commonwealth.” Therefore, Samsung’s Motion for Judgment on the Pleadings was granted, and Policyholders’ was denied. Thanks to Haley Matthew for her contribution to this article. Should you have any questions, please contact Andrew Gibbs.
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